Foreign direct investments surge

By Melissa Luz T. Lopez
Senior Reporter
FOREIGN direct investments surged in March from a year ago and from the preceding month on the back particularly of equity capital placements amid sustained confidence in Philippine prospects, the Bangko Sentral ng Pilipinas (BSP) reported on Monday.
Foreign direct investments (FDI), net of liabilities, increased by 27% to $682 million in March from the year-ago $537 million, and was up a fifth from February’s $573 million.
Driving net FDI inflows was a surge in net equity inflows to $318 million from just $9 million, as gross placements grew nearly sevenfold to $351 million from $51 million a year ago, while withdrawals fell by 21% to $33 million from $42 million.

Singapore, Hong Kong, Japan, the United States and Sweden were the biggest sources of capital infusions that month, the central bank said.
The funds were invested in manufacturing; real estate; art, entertainment and recreation; as well as financial and insurance activities.
Reinvested earnings increased by 12.6% to $63 million in March from $56 million a year ago.
Only investments by foreign companies in debt instruments of their Philippine units contracted — by more than a third to $301 million from $472 million a year ago and by about 27% from February’s $412 million.
YEAR-TO-DATE INFLOWS ALSO SURGE
March inflows helped fuel a 43.5% hike in FDI net inflows to $2.175 billion last quarter from $1.516 billion in 2017’s first three months.
“This reflected investors’ continued positive outlook in the Philippine economy on the back of sound macroeconomic fundamentals and robust growth prospects,” the BSP said in a statement.
The same comparative three months saw net equity inflows growing nearly sevenfold to $887 million from $129 million, as gross placements increased nearly fivefold to $996 million from $201 million while withdrawals went up by half to $109 million from $72 million.
Reinvested earnings steadied at $193 million, while intercompany borrowing edged down 8.2% to $1.095 million from $1.193 million.
FDIs provide much-needed capital for the economy, generating more jobs for Filipinos and spurring business activity as companies expand.
The Philippine economy grew by 6.8% in the first quarter, fueled particularly by industry expansion, the Philippine Statistics Authority said. This compares to the government’s 7-8% growth goal for 2018 that will be supported partly by planned P1.068 trillion in infrastructure investments for the year.
Expectations of strong state spending will sustain positive investor sentiment towards the Philippines, one analyst said, given bets that the current administration will catch up in its plan to spend some P8 trillion on infrastructure until 2022.
“Consistent with investor views, the Philippine economy accelerated in the first three months of the year after government spending surged on account of the country’s ‘Build, Build, Build’ program…,” Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines, said when sought for comment.
“Because of this, direct investments from abroad are likely to increase again this year, even as the rate of growth could decelerate amid rising interest rates and global geopolitical uncertainties.”
Spending on public infrastructure surged by 25.1% in the first quarter, according to the Finance department, helping to drive a 27% year-on-year increase in total state spending that surpassed the program by three percent in the same three months.
FDIs reached $10.049 billion last year.
Mr. Dumalagan said the central bank’s $10-billion FDI forecast for 2018 is “achievable” given current trends, even as he cautioned that rising interest rates and planned changes in fiscal incentives stand as major risks to the outlook.
The Finance department has been pushing tax reform that will gradually reduce corporate income tax rates to match those of the Philippines’ Southeast Asian rivals, while removing fiscal incentives deemed redundant. Firms registered with the Philippine Economic Zone Authority have been vocal in their opposition to the proposal, warning it could make the Philippines even less competitive on this count compared to its Southeast Asian competitors.
The measure is pending at the committee level in the House of Representatives.